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Few federal agencies have as much bipartisan support as the National Endowment for Democracy. Created in 1983, NED’s stated mission is to “strengthen democratic institutions around the world through nongovernmental efforts.” In actuality, NED allows U.S. politicians to meddle in foreign elections at the same time they pretend to be spreading democracy.

The previous year, Ronald Reagan had announced in a speech to the British Parliament, “Let us now begin … a crusade for freedom that will engage the faith and fortitude of the next generation … to foster the infrastructure of democracy.”

NED’s first chief, Allen Weinstein, later explained the Endowment’s rationale in 1991: “A lot of what we do today was done covertly 25 years ago by the CIA.” NED aimed to be cleaner than the CIA — not the loftiest standard.

NED was created because Reagan believed the federal government was not doing enough to promote democracy abroad, despite the fact that the U.S. Information Agency, the Agency for International Development, and various education programs were conducting scores of exchange programs, sending bargeloads of publications overseas, and whooping up the American Way around the globe.

NED is based on the notion that its meddling in foreign elections is automatically pro-democracy because the U.S. government is the incarnation of democracy. NED has always operated on the principle that “what’s good for the U.S. government is good for democracy.”

NED seeks to provide the U.S. government with deniability for its foreign meddling. NED describes itself as a “private, nonprofit, grant-making organization created … to strengthen democratic institutions around the world.” In reality, it is a government agency that launders U.S. tax dollars, removing the taint before foisting them on U.S.-favored groups abroad.

NED was designed to be largely unaccountable. It is largely a conduit of taxpayer money to the national Democratic and Republican parties (through organizations they created after NED was authorized — the International Republican Institute and the National Democratic Institute), the AFL-CIO, and the Chamber of Commerce. These four organizations have received most of the money NED has distributed, much of which they passed on to consultants, foreign political parties, and other organizations. For many years, its board of directors consisted largely of NED grant recipients. The agency was controlled by lobbyists, political hacks, and interest groups on its gravy train, ensuring no shortage of “honest graft.” Perhaps Congress believed that having a hand in the till is necessary to truly understand the agency and its mission.

NED’s second president, Carl Gershman, a former executive director of the Social Democrats USA, a splinter group of the Socialist Party, asserted in August 1984 that direct federal aid to private organizations would allow the United States to “engage in the competition in the world of ideas.” He complained that “the word ‘democracy’ has been appropriated by its enemies” and justified the new agency: “While only Washington can provide adequate funding, the nongovernmental nature of the endowment allows for more flexibility.” NED and its advocates talked as if the idea of freedom could not compete without a government subsidy. But people in East Europe were bitterly opposed to Soviet rule not because they received American-subsidized pamphlets but because they hated being oppressed.

The Endowment quickly begot debacles and backlashes against the United States. Sen. Ernest Hollings (D-S.C.) observed in 1986, “This thing is not the National Endowment for Democracy but the National Endowment for Embarrassment.” Rep. John Conyers (D-Mich.) complained, “From its very inception, the National Endowment for Democracy has been riddled with scandal and impropriety.”

The General Accounting Office slammed NED in 1985 for improperly diverting $3 million to institutes connected to the Democratic and Republican parties, despite a prohibition of such handouts in a congressional appropriation bill. Rep. Hank Brown (R-Colo.) complained, “Congress has made it abundantly clear that it does not want the money it gives to NED to go to the political parties. How can a group that flouts clear congressional intent presume to teach democracy to others?”Intervening in democratic countries

The legislation that created NED prohibited the agency from interfering directly in foreign elections: “Funds may not be expended, either by the endowment or by any of its grantees, to finance the campaigns of candidates for public office.” Yet NED intervened in the 1984 Panamanian presidential election, shuffling $150,000 to support Nicholas Ardito Barletta, the candidate favored by the Panamanian military. At that time, the U.S. government opposed military rule in Panama. After NED money financed a huge May Day rally for Barletta, U.S. Ambassador James Biggs wired Washington, “The embassy requests that this harebrained project be abandoned before it hits the fan.” Though Barletta won the election, he was later deposed by the military.

The Reagan administration originally justified NED as a way to promote democracy in “totalitarian” states or where “democracy is still fragile.” However, one of the first targets of U.S. intervention was France, a nation with almost two centuries of democratic government. Irving Brown, Paris-based director of international relations for the AFL-CIO, explained the use of NED funds: “France … is threatened by the Communist apparatus…. It is a clear and present danger if the present is thought of as 10 years from now.”

The National Inter-University Union, a right-wing French student group, received $575,000 in NED funds. The group had led “numerous anti-government protests, including mass demonstrations [in 1984] against government plans to remove subsidies from private schools.” NED never explained why government subsidies for French private schools were a cause worthy of U.S. tax dollars. The grant was justified because the union was a “counterweight to the propaganda efforts of left-wing organizations and professors active within the university system.” The New York Times noted the student union’s “reputed ties to the Service d’Action Civique, an outlawed, extreme-right paramili-tary group.” The AFL-CIO’s Free Trade Union Institute, which funneled NED money to the French group, informed NED’s Gershman that the grant was intended to finance “the struggle against anti-democratic forces, the organization of factions teaching organizational techniques, and techniques for staging demonstrations.” After a public uproar in France, Gershman suspended the grant to the French student group “until we clear up questions about its antidemocratic character.”

Gershman initially denied that the grant had been secret. However, a memo to Gershman from Eugenia Kemble, director of the Free Trade Union Institute, insisted that NED activities must be kept secret in some countries: “The beneficiaries of these funds would be in danger or in trouble if the financing was made public … because repressive governments or groups of communists could use this information against the individuals or the unions that we want to help.” A French newspaper reported that “France is on the list of nine countries for which financing is kept secret, along with the Philippines, Chile, Brazil, Nicaragua, Poland, Surinam, Paraguay and others.” NED did not disclose details of the grants either in its annual report or in its reports to Congress. (The grants occurred long before American neoconservatives identified France as an enemy of U.S. hegemony.)

Another NED target — also a democracy — was Costa Rica. Even though Costa Rica had been a democracy for almost a hundred years, NED money poured into the coffers of the opposition in the mid-to-late 1980s. Almost half a million dollars in NED money was forwarded through the International Republican Institute (IRI) to the Association for the Defense of Costa Rican Liberty and Democracy, widely perceived as a front for the conservative Social Christian Party. Rafael Angel Calderon, the party’s presidential candidate, personally received almost $50,000 in NED funds. Seven Costa Rican legislators complained to the U.S. Congress that the organization “used the [NED] funds to prepare for the 1990 elections.” Costa Rica’s president, Oscar Arias Sanchez, may have been targeted because he failed to support the Reagan anticommunist agenda in Central America. Rep. Jim Leach (R-Iowa) complained, “I think it’s unseemly, both politically and constitutionally. Here you have the Republican Party involved via the IRI with the opposition to the government in power, in a country that is the strongest democracy in Latin America and where the head of state won the Nobel Peace Prize” for his peace plan to end the conflict in Nicaragua.NED’s top target

NED’s top target in the 1980s was the Sandinista regime in Nicaragua. One Nicaraguan organization, Prodemca, received $400,000 from NED in 1985. The organization proceeded to place full-page advertisements in the Washington Post, New York Times, and Washington Times urging Congress to vote in favor of giving $100 million in military and other aid to the Nicaraguan Contras.”

In late 1988, Reagan requested and Congress approved $2 million “in support of organizations opposing the Sandinistas” in the 1990 elections. Sally Shelton-Colby, an NED director, explained, “There is a lot of Soviet and Cuban money coming into the Sandinistas. This is an attempt to balance that money by helping the democratic forces.” The existence of Soviet aid apparently nullified the U.S. statute book.

Toppling the Sandinistas was also a passion of the “kinder, gentler” presidency of George H.W. Bush. When his administration in September 1989 floated a plan to provide $9 million in aid to Violeta Chamorro’s campaign, the Washington Post noted that “there appears to be strong sentiment now — even among many Democrats opposed to a resumption of covert CIA activities — for making an open, undisguised contribution to Chamorro as a means of demonstrating U.S. support for democracy in Nicaragua.” The Associated Press reported that the Bush administration believed that “the U.S. aid would lend credibility to the opposition.” Sen. Tom Harkin (D-Iowa) asked, “Do we really want Mrs. Chamorro to be known as the best candidate American money can buy? Do we really want free elections and fair elections in Nicaragua, or do we want an election bought and paid for by the United States government?”

White House press spokesman Marlin Fitzwater justified the $9 million: “It’s the only way to help Mrs. Chamorro and the opposition to assure a reasonable shot at free and fair elections.” Yet federal law clearly prohibited NED from financing political campaigns. The Associated Press noted, “To reconcile that apparent conflict, endowment officials say they are not helping Mrs. Chamorro but rather Nicaragua’s democratic coalition — and that Mrs. Chamorro just happens to be the coalition’s candidate to replace Nicaraguan President Daniel Ortega.”

When the agency gave $100,000 to a paper owned by Chamorro, it claimed the handout was nonpartisan assistance, even though the paper did not offer “equal space” to the Ortega campaign. The U.S. aid went into the coffers of UNO, the coalition of parties and groups supporting Chamorro. Elizabeth Cohn, a professor at Goucher College, noted, “New organizations sprouted in Nicaragua and NED was first on the scene as their primary, sometimes only, funder. NED monies mobilized the opposition and with the enormous amounts of money NED funneled into Nicaragua, they essentially bought the election.” NED’s Gershman justified the agency’s actions: “If we’re not going to enter into those situations — supporting democratic groups — we would not be doing our job.” NED’s supposed “job” counted for far more than mere federal law.

Unfortunately, NED did not acquire the habit of statutory compliance as it aged. In the new century, the agency has been involved in scandals in Venezuela, Iraq, Ukraine, and elsewhere. But it remains popular in D.C., in part because it permits politicians to preen as world saviors.

There is no honest way to “fix” foreign elections. Any such interventions will be plagued by mendacity and deceit. Rep. Hank Brown commented in 1984, “It is a contradiction to try to promote free elections by interfering in them. But this is exactly what NED has done.” NED is long overdue for abolition.

This article originally appeared in the July 2009 edition of Freedom Daily. Subscribe to the print or email version of Freedom Daily.

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James Bovard serves as policy adviser to The Future of Freedom Foundation. He has written for the New York Times, The Wall Street Journal, The Washington Post, New Republic, Reader's Digest, Playboy, American Spectator, Investors Business Daily, and many other publications. He is the author of a new e-book memoir, Public Policy Hooligan. His other books include: Attention Deficit Democracy (2006); The Bush Betrayal (2004); Terrorism and Tyranny (2003); Feeling Your Pain (2000); Freedom in Chains (1999); Shakedown (1995); Lost Rights (1994); The Fair Trade Fraud (1991); and The Farm Fiasco (1989). He was the 1995 co-recipient of the Thomas Szasz Award for Civil Liberties work, awarded by the Center for Independent Thought, and the recipient of the 1996 Freedom Fund Award from the Firearms Civil Rights Defense Fund of the National Rifle Association. His book Lost Rights received the Mencken Award as Book of the Year from the Free Press Association. His Terrorism and Tyranny won Laissez Faire Book's Lysander Spooner award for the Best Book on Liberty in 2003. Read his blog. Send him email.

Reading List

Prepared by Richard M. Ebeling

Austrian economics is a distinctive approach to the discipline of economics that analyzes market forces without ever losing sight of the logic of individual human action. Two of the major Austrian economists in the 20th century have been Friedrich A. Hayek, who won the Nobel Prize in Economics, and Ludwig von Mises. Posted below is an Austrian Economics reading list prepared by Richard M. Ebeling, economics professor at Northwood University in Midland and former president of the Foundation for Economic Education and vice president of academic affairs at FFF.